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ArticlesRefinancing means replacing an existing loan or financing facility with a new facility, usually to change the interest/profit rate, monthly payment, repayment term or lender. In the UAE, refinancing can include transferring a consumer loan or mortgage to another financial institution. A refinance only makes sense if the total benefit exceeds settlement fees, new processing costs and any extra financing cost caused by extending the tenure.
Why do people refinance?
- To obtain a lower interest/profit rate.
- To reduce the monthly instalment.
- To switch from one lender to another.
- To change from variable to fixed pricing, or vice versa.
- To restructure repayment over a different remaining tenure.
- To consolidate liabilities where appropriate.
UAE consumer-loan transfer rule
CBUAE Regulation No. 29/2011 permits a borrower to transfer a loan/financing from a UAE bank or finance company subject to applicable requirements. The early payment fee for the transfer is capped at 1% of the outstanding balance or AED 10,000, whichever is less, for the relevant consumer-loan category.
Mortgage refinancing
CBUAE mortgage rules state that there should be no impediment to borrowers refinancing with another institution. Home-loan early settlement is capped at a maximum of 1% of outstanding balance or AED 10,000, whichever is less under the retail-fee annex.
Example: lower rate but longer tenure
Illustration only: a borrower has 36 months remaining on a loan but refinances over 60 months to reduce the monthly payment. Even if the new annual rate is lower, the longer repayment period may increase the total amount paid. Compare the full repayment schedule, not the monthly instalment alone.
What costs should you include in a refinance comparison?
- Early-settlement fee on the existing facility.
- New loan processing or arrangement fees.
- Valuation or property-related costs for a mortgage.
- Insurance or takaful changes where applicable.
- Total interest/profit under the new tenure.
- Any fixed-rate break cost where applicable.
- Administrative letters or release costs permitted under current rules.
Refinancing vs debt consolidation
Refinancing usually replaces one existing facility with a new one. Debt consolidation combines multiple liabilities into one repayment structure. A new facility can sometimes do both, but they are not automatically the same thing.
Frequently asked questions
Can I transfer my personal loan to another UAE bank?
Yes, subject to the receiving bank’s approval and current CBUAE transfer rules.
Is refinancing always cheaper?
No. Fees and a longer tenure can outweigh the benefit of a lower rate.
What is the early-settlement cap for a consumer-loan transfer?
CBUAE rules cap the relevant fee at 1% of outstanding balance or AED 10,000, whichever is less.
Can I refinance a mortgage?
Yes, subject to eligibility, property and lender requirements. Current CBUAE rules support consumer mobility and set settlement-fee limits.
Does refinancing erase my credit history?
No. Existing and new credit facilities can form part of your ongoing credit record.